Capital Cost Allowance on Your T2125

Capital cost allowance (CCA) is the CRA's version of depreciation: instead of deducting the full price of a capital asset — a laptop, a camera, a work truck — in the year you buy it, you deduct a percentage of its cost each year on Line 9936 of your T2125. Anything with a useful life beyond one year is a capital asset; deducting the full cost right away is reserved for current expenses like office supplies and repairs.

Every asset belongs to a CCA class with its own declining-balance rate — computers sit in Class 50 at 55%, furniture and most equipment in Class 8 at 20%, vehicles in Class 10 or 10.1 at 30%. Each year you apply the class rate to your undepreciated capital cost (UCC): the portion of the asset's cost you haven't deducted yet. Claiming CCA is optional — in a low-income year you can claim less than the maximum (or nothing at all) and keep the UCC available for future years when the deduction is worth more against a higher tax bracket.

Two first-year rules matter. The half-year rule normally limits you to 50% of the class rate in the year you acquire an asset. But the Accelerated Investment Incentive — reinstated by Budget 2025 (Bill C-15) for eligible property acquired after 2024 and available for use before 2030 — replaces that with an enhanced first-year claim of three times the half-year amount (1.5× the full class rate). Property that became available for use during 2024 only got a reduced enhancement, so check which regime matches your purchase date before filing.

Disposing of an asset has tax consequences too: sell it for more than its remaining UCC and the difference comes back into your income as recapture; sell the last asset in a class for less than the UCC and you can usually claim the shortfall as a terminal loss (Class 10.1 passenger vehicles excepted). And think twice before claiming CCA on a home office — it can expose your principal residence to capital gains tax, as covered in our business-use-of-home guide.